Is homeownership truly better than renting?

[Fritzo]

A house is a long term investment. While you may only get 1% return on your house, you get your money back after selling it. It also provides a great retirement supliment because you will have low cost housing when you retire (if you pay off the mortgage), and equity will give you financial resources if needed.

Rent = money with 0% return, constant rising costs, and no security.

 

[KillerCharlie]

Ummm.....Why are so many people in this thread comparing owning a single family home to renting an apartment? You do realize that you can rent a single family home right?

I don't like the thought that I don't determine how long I live there - your landlord can kick you out at the end of your lease. I like long term stability.

 

[spidey07]

What's a can garden look like and do you think adding one would help my property value?

Not much adding to property value unless you have extensive landscaping, but even then you won't get the money you spent on it back. I was talking more about growing vegetables.

 

[dullard]

This must be taking into account homes in the midwest bumblefuck idaho where nobody wants to live. If you play the real estate game smart you can come out way ahead.

0.5% above inflation: http://efinancedirectory.com/articl..._Instead_of_a_House_Will_Make_You_Richer.html

1.7% above inflation: http://www.realtor.org/press_room/public_affairs/tphousingasaninvestment

Yes, if you do it well, you can come out way ahead. But, you are talking about the minority of situations then. I just listed nationwide averages. There will be people who do far better and people who do far worse.

 

[IceBergSLiM]

0.5% above inflation: http://efinancedirectory.com/articl..._Instead_of_a_House_Will_Make_You_Richer.html

1.7% above inflation: http://www.realtor.org/press_room/public_affairs/tphousingasaninvestment

Yes, if you do it well, you can come out way ahead. But, you are talking about the minority of situations then. I just listed nationwide averages. There will be people who do far better and people who do far worse.

Buying low in a desirable area or soon to be desirable area is only one way to come out ahead. You can work additional angles such as starting a side business from your house so you can right off a % of the mortgage above and beyond the interest you get to write off. Plus you could also write off a % of the utilities. Something that can't be done in a rental situation. Additionally you can rent out some portion of your property and defray costs further. However most people never take advantage of these tools and these are the ones that should probably stay renting.

 

[IndyColtsFan]

Same here, MUCH cheaper to own. No way could I get a 3000 sq ft apartment for under the 1500/mo I pay now.

This. My house is about 2800 sq. ft, all brick, and has a 3 car garage and about 1/2 acre of land with mature trees. There is no way I could get an apartment of that size with those amenities for anywhere near what I pay every month.

Owning a house has many intangibles as well, as someone else said. Let's face it, apartment living sucks. Even if I didn't get a dime of equity, I think I would STILL prefer to own a house just for the privacy and the fact that it is something that I own and can do just about anything I want to it. And this is coming from someone who generally doesn't like yard work, etc.

 

[sourceninja]

Bad market conditions. No one could have expected it. The up-side is, it'll regain its value. You're not planning on selling it NOW, are you?

I was planning to sell it a year after I bought it. Now I'm planning to sell it the moment I can break even.

 

[KCfromNC]

Anyone who tells you otherwise is probably an apartment dweller, or bought at the top of the market like an idiot.

Could also be someone who knows how to do math.

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html

 

[vi edit]

Buying low in a desirable area or soon to be desirable area is only one way to come out ahead. You can work additional angles such as starting a side business from your house so you can right off a % of the mortgage above and beyond the interest you get to write off. Plus you could also write off a % of the utilities. Something that can't be done in a rental situation. Additionally you can rent out some portion of your property and defray costs further. However most people never take advantage of these tools and these are the ones that should probably stay renting.

I think the point is that people should buy houses for a place to live. Not a way to make money.

It's trying to turn a profit on them that helped run up the largest real estate implosion in modern history.

 

[IndyColtsFan]

I think the point is that people should buy houses for a place to live. Not a way to make money.

It's trying to turn a profit on them that helped run up the largest real estate implosion in modern history.

Well said. Everyone hopes to make money off their properties when they sell and when you buy a house, you should buy something that you think has resale value and will appreciate, BUT -- way too many people bought homes solely for investment purposes and it bit them in the butt hard.

 

[thegimp03]

The bad thing I see about renting (yeah, it's cheaper) is that at least in my area, with roommates, it's about $1,000 a month to rent and feels like throwing money down the drain. I will have rented for about 5 years by the time I get married and move in with my wife and that's roughly $60,000 that could have been put into a house.

The only good thing about renting is that it gives you the opportunity to move and try out different areas pretty easily and it's cheaper than buying a house.

 

[mshan]

Hedge against inflation, and if you can get a low down payment mortgage at a favorable rate, way to create wealth over time with relatively low initial layout of money.

 

[IceBergSLiM]

I think the point is that people should buy houses for a place to live. Not a way to make money.

It's trying to turn a profit on them that helped run up the largest real estate implosion in modern history.

I disagree. trying to turn a "QUICK PROFIT" was the issue. The magic pill, getting something for nothing attitude.

 

[DaWhim]

Just put an offer in on my first house yesterday. I'm really excited to get out of the "throw $750 into the furnace every month" thing. With a house, even if it's small for the first few years, every dollar I put into it increases the value of it. That is, should the world not END in the next few years, and should I keep up with the house, I should be able to sell the house for more than I paid for it and use the extra money to put a bigger down payment on a nicer house.

If I were to rent for the next 5 years, I would pay $45,000 into the apartment and not see a dime of it in return.

Edit: For those saying I could keep renting and just put a set chunk of money into a high yield savings account, that's still money on top of what I'm spending to live there. Wouldn't you like to see a return on just the money you spend to live somewhere?

I will be the first in line to laugh at you when I see the interest rate starts to raise. guess what is the relationship between interest rate vs house price?

 

[SacrosanctFiend]

How often CAN someone put 50% down

Everybody CAN if they hold off buying a house until that have it saved up and buy within their means. I was talking about why homeownership is better than renting for me, and said that it depends.

 

[Via]

I just bought a home after 10 years of comfortable renting, and in a lot of ways it's been an eye-opening experience.

My thoughts so far:

1) Think it through like a MF. Make SURE to the best of your ability that you wont be moving anytime soon.

2) You have to be willing to do shit yourself (or learn how to do it). Otherwise - you're home will become a constant $ drain. I've learned to do more things than I cared to in the past 2 months.

3) It's a constant job, as opposed to living in an apartment. No more lazy mornings - there's ALWAYS some thing that needs doing.

4) Repair/replacement costs add up massively. Make sure the home you're buying has a newer roof, furnace, AC etc. If it doesn't - get some financial concessions.

5) HAVE THE RADON TESTED. Believe it or not, all of the realtors I dealt with the past few years said not to worry about it. I had it done anyway before closing, and the Radon levels were FIVE times as high as recommended. It cost about $1500 to put in a mitigation system.

6) Mowing the lawn is not as bad as I thought, but painting just sucks.

7) Put down a little extra $ towards principle every month and you'll cut down your loan time by a 1/3.

 

[DougK62]

The best decision I've ever made was buying a house out in the middle of nowhere when I was 23. I love fixing things, upgrading stuff, doing lawn work, etc. It has done wonders for my mental health. Homeownership is not for everyone, but WOW do I love it.

 

[rh71]

One thought I had on our recent cruise... we run into old people who've been on countless cruises... they practically live on them week to week. At $600 a week, all-you-can-eat, room service, destinations, shows, etc... it is not a bad deal.

 

[rh71]

7) Put down a little extra $ towards principle every month and you'll cut down your loan time by a 1/3.

They say the avg home is lived in for just 7 years. Be sure you're going to live there the rest of your life if you do put down extra otherwise it is "wasted" in the sense that you get it back when you sell anyway (or worse it is lost if upside down). We had intentions of staying here for a very long time but we're getting ready to sell now after... 8 years.

 

[soulcougher73]

I think the point is that people should buy houses for a place to live. Not a way to make money.

It's trying to turn a profit on them that helped run up the largest real estate implosion in modern history.

This. Buying homes as investments is a fairly new thing. You should buy as a place to live. A lot of people got bit in the ass because they figured they could make a quick buck on a market that was artificially inflated WAY above the norm. Bubble burst.

 

[DesiPower]

Home ownership is cheaper and better IF and only IFF you buy a house of comparable size age and location. generally ppl go for bigger house (way bigger than their appts) in a better neighborhood and ISD and new construction!! well...
So... IMO its pretty stupid to compare renting and owning if you won bigger newer and better...

I moved from a 1400sqft appt for which i paid ~1000 to a 3300 sqft home for which i pay ~2000. I do feel I made a terrible mistake that extra 1k I am paying is for sheer luxury. I should have bought a smaller house in a cheaper neighborhood, my kids not going to school for another 2.5 years.

 

[lifeobry]

I love it. I can play my home theater and ridiculous volume. It's quiet, I have a large deck where I can grill/cook/smoke just relax. Can garden. Tax deductions which I really need otherwise get raped in taxes. If I want to improve something inside or out I can just go do it. Privacy, nobody can enter my home unless I allow them.

Yeah these are definite plusses. Freedom essentially.

 

[slackerinabox]

To add to my original reply,

Painting a room knowing that I won't be leaving anytime soon = awesome. Same with any other upgrade. My wife always wanted wall paper, for example, but I refused to go through the expense if we rented... Now? Wall paper away!

 

[wyvrn]

interest will drive the cost of the home to 2x the list price, and the interest gets paid mostly up front on your mortgage

so even if you sell at a profit, you are going to be at a loss overall

when you consider inflation, your home is a liability on the balance sheet almost every time

but if you consider the well being that you get from owning it and having your own space, then it may be worth it if that is what you value

i hated living in apartments, being cramped, and having loud neighbors, so it is worth to me to pay more for a home

 

[Meghan54]

interest will drive the cost of the home to 2x the list price, and the interest gets paid mostly up front on your mortgage

so even if you sell at a profit, you are going to be at a loss overall

when you consider inflation, your home is a liability on the balance sheet almost every time

but if you consider the well being that you get from owning it and having your own space, then it may be worth it if that is what you value

i hated living in apartments, being cramped, and having loud neighbors, so it is worth to me to pay more for a home

While it's true that mortgages are front-loaded with interest payments, it's those interest payments that, when deducted on your income tax filings, that allows most people to get into itemizing their deductions....health expenses, continuing education expenses, state/local taxes, etc.

If you don't have mortgage interest deductions, you typically won't get any benefit from itemizing deductions, better off to just take the standard deduction.

Comparing the two avenues over the decades of home ownership we've had, we've come out much further ahead with owning. We own our land outright and have less than 7 years of "normal" payments left on our mortgage.